Since the election, the Tory/Lib-Dem coalition have set about cutting public expenditure under the guise of reducing the spending deficit. Now, it might be worth remembering why there is a spending deficit - there was a recession.

The coalition have repeated the mantra "All Labour's Fault". But the recession resulted from a fall in private investment in the economy stemming from the financial crisis. Government spending did not get out of control - a deficit had to open up because the recession had to be countered with public investment and the banks had to be rescued from a collapse which would have wiped out the savings of individuals and organisations.

So, the ALF argument is wrong, what about TINA: there is no alternative? Well, that shows a remarkable lack of imagination - but will deficit reduction through spending cuts actually work?

Ann Pettifor and Professor Victora Chick have published a study of previous attempts by governments to cut deficits by cutting spending and found that

During the early years of the Great Depression (1931-1933), expenditure fell to 510 million pounds from 580 million and government debt increased to 183 percent of GDP from 173 percent. Conversely, from 1934, the government began to expand expenditure and the public debt fell.

From 1947 to 1975, when government spent freely on the National Health Service, public housing and education, the public debt fell each year. The first increase in debt coincides with the 1976 fiscal consolidation.

[...]

Increases in public expenditure are associated with reductions in public debt. Very roughly, so long as there is unemployment, for every percentage rise in government expenditure, the public debt falls by half a percent, and vice-versa.

In other words, it is the jobs deficit that needs to be closed if public debt is to be reduced - and that means spending, not cutting. This could be done by an investment bank "owned by the public but controlled by an independent, commercially-orientated board tasked with delivering long term returns" which would "facilitate investment for vital infrastructure, to support good small businesses and to accelerate our transition to a low carbon economy".

This Tory/Lib-Dem coalition is surviving despite the Lib-Dems experiencing negative feedback from people who voted for them at the last election. The banking minister Vince Cable has issued a Green Paper with no tough proposals for getting the banks (which we own!) to make credit available to firms, and energy minister Chris Huhne is cutting away at Labour's Green Investment Bank, Carbon Trust, and commercial loans to firms in low-carbon manufacturing. The private sector is expected to make up for the cuts to public spending - but why would banks lend if demand is falling for goods and services as people lose their jobs?

Returning to the excuses given for the cuts, the "Big Society" is what comes once ALF and TINA have been exhausted. As the Tory backbencher David Davis has been quoted as saying

"The corollary of the big society is the smaller state. If you talk about the small state, people think you're Attila the Hun. If you talk about the big society, people think you're Mother Teresa."

It is perfectly natural that the Tories, as the traditional party of the ruling class, would want to cut the social wage. But as Pettifor and Chick show, it does not make economic sense. And next years' local elections are likely to show, it does not make electoral sense for the Lib-Dems.

In the coming weeks and months the nature of 25% spending cuts will become apparent. Opinion polls show that although a majority of people say they believe the cuts are intended to "balance the books", a majority also think that they will be affected. Approval for the coalition has slumped - and that's before the full extent of cuts is announced. And before next year's VAT rise.

Across the country, groups are forming to resist the cuts agenda. Where I live, Darlington Against Cuts is being set up to defend local services. The Tory/Lib-Dem coalition's cuts should be met with huge protests - so, join your local anti-cuts campaign. Don't mourn, organise!

I contributed a question to Labour Uncut's crowdsourced interview with Ed Miliband, a strong contender in the Labour leadership contest:

Q. (from Jamie and James): The co-operative sector is a growing part of the UK economy. What would you do as leader to promote the creation of more co-owned firms in the private sector? Would you consider mutualising banks like Northern Rock?A. I do think there’s a case for mutual ownership of Northern Rock, because I think we can’t just go back to business as usual when it comes to the banking system. If we think we’re just going to end up back in a situation of the private sector banks with just a bit more regulation, then I don’t think that that’s the right way forward. We’ve got to look at all of these options, not just mutual ownership by the way, public ownership, because that’s what they do in other countries like Germany where they’ve succeeded in building a bigger industrial base.

Whereas I felt that his brother didn't really answer my question, but unfortunately the good folk at Labour Uncut combined my question with one on Northern Rock (the future of which was pretty much settled by the previous government's compliance with EU State Aid rules).

Though I note that in the latest Tribune, Ed Miliband does deal with the question of increasing the number of co-operative enterprises in the private sector. Tribune asked:

How do you propose to change the balance of the British economy from one dominated by financial services to a broader mix of manufacturing, innovation, the “knowledge economy”, technical and skill-based production, and co-operatives?

And Ed replied:

Reshaping our economy is not a project for one year or one term, but a long-term effort. It begins by recognising the role government can play through an active industrial policy. It is scandalous that the coalition is abolishing regional development agencies when in many places they have led the way in creating the growth of the future. We also need to think again about our financial sector. We should make use of our stake in the banks, rather than simply sell them off as quickly as possible. I would take the opportunity of the rationalisation of these stakes to create a new banking system which works to invest in the industries of the future and the small businesses and co-operatives that can be the centre of our communities.

Q. (from James) The co-operative sector is a growing part of the UK economy. What would you do as leader to promote the creation of more co-owned firms in the private sector?
A. I think that there’s a couple of reasons that people are attracted by the co-op sector. One is it gives people more power. I think secondly it reflects a sense of team work that is more important. And thirdly one of the lessons people have drawn from the banking crisis is that markets need morals and rules. And co-ops seem to live by them. I think we can do that in the public as well as the private sector. And the tories are talking about this but they’re only talking about more power for staff not for citizens as well. I think the best forms of co-ops bridge that divide. I think in the private sector the most obvious candidate is Northern Rock where the mutualisation of Northern Rock would be a very big addition to the cooperative sector.

Though the growth of the co-operative sector, and the role of co-ops in delivering public services is adequately addressed - you will notice that the substance of the question isn't answered.

My worry is that co-operative enterprise is seen as window-dressing rather than a central part of Labour's economic agenda.

The programme is on the BBC, a public service broadcaster, so I expected Neil to challenge the minister thoroughly. Sadly, this did not take place. Neil failed in his job of public service by neglecting to ask the questions which, through market failure, are not asked by private broadcasters. I intend to correct this public service failure by asking the questions here...

The Tory/Liberal coalition is committed to reducing DWP spending by 20% in the financial year 2011-12. The Chancellor has suggested that spending cuts in other departments could be avoided if the DWP makes greater savings. This is just the start, of course, there will be future cuts throughout the course of the parliament.

On pensions, the ConDem's have already acted to reduce the terms and conditions of both public and private sector pensions - public sector employees will pay more and get less, private sector pensioners will in future get less. Not very fair, but for a coalition of millionaires, not very surprising.

Unasked questions: What about the great number of private sector employees that are not paying in to pension schemes? Could be permitted and encouraged to pay into local government pension funds, rather than merely depend on the state pension in retirement?

Now for the work aspect of the DWP. The main problem here is that Duncan Smith's welfare reform plans appear one-sided. For example, increased conditionality for work-related benefits - turn down a job offer, get a benefit cut - is based on an assumption about people who are out of work for long periods of time. Duncan Smith also wants to make the transition from unemployment or disability benefits to employment easier for the individual - he calls this "making work pay".

Both these examples demonstrate an approach which treats both the supply of jobs and the rate of pay as external to the functioning of the welfare system and separate from the economic policy of the coalition.

We already know that long periods of unemployment have a correlative link to ill-health - the areas with the highest levels of health-related benefit claimants are also the areas with the highest levels of unemployment.

Unanswered question: does the Work & Pensions minister have any view on the impact of cuts to regional economic development?

Given that unemployment has risen during the recession and fewer job posts are advertised than there are people dependent upon benefits - is it not the case that there is "structural unemployment"? In which case, the problem is not the willingness to work, but the demand for work by employers.

Unasked questions: Is the intention to reduce benefit payments over time, regardless of the attitude of the claimant?

Now, Duncan Smith would no doubt counter with some OBR statistics about a sudden demand for workers by private employers. But this is not credible: for one thing, the impact of spending cuts will not revive consumer demand; also the abolition of capital allowances which help export industries and the likelihood of lower demand for UK goods and services in the largest export market, the Eurozone, will conspire against rebalancing of the economy and thus, private sector job creation.

The DWP can expect more demand from those the coalition makes unemployed in the public sector and those made unemployed as a consequence of cuts impacting on the private sector.

During the last few days it became apparent that Sir Alan Budd, the head of the newly-created Office for Budget Responsibility, was to depart his position before the new department (quango?) had been established in law.

Given that one of his last acts was to issue a rushed report on how, contrary to expectations, the private sector would create enough jobs to reduce unemployment in the face of huge public sector lay-offs (and associated private sector job losses). This worked very well for the Prime Minister, David Cameron, who was able to use the OBR report to back up the case for the emergency budget.

Watching the Finance Bill being voted on last night, I recalled the words Budd uttered during an interview for a 1992 documentary by Adam Curtis. The programme "The League of Gentlemen" was the third episode of Pandora's Box, a series which dealt with the sciences, of which economics is famously one of the more dismal.

This clip has been shared by various Labourists (as Katie Doubleyou calls us) through Twitter and was even picked up by Paul Waugh, the political editor of the Evening Standard, after Clifford Singer of the Other TaxPayers' Alliance blogged it.

Of course, now that all that's happened, I find that someone else had created the exact same clip a few weeks back. D'oh.

For those people at the heart of the New Labour project, there is understandable confusion at the rhetoric employed by candidates in the Labour leadership contest. Some have called this "tacking left" - and a phrase often use in ruling class media is "lurching to the left". Since I dislike spatial metaphors, I'll leave that issue to one side for the moment. The concern is, in more direct language, that winning popularity within a party is not the same as winning popularity within an electorate. (On the other hand, without an enthusiastic party membership there's no hope of reaching the electorate!)

I have already detailed my theory that New Labour's repositioning during the '90s did not primarily relate to swing voters, but to those most likely to influence their voting intentions. If I can put forward a possible explanation for Labour's 2010 general election defeat that stems from this theory, it is that many floating voters were no longer open to the potential of voting Labour - and attempting to appeal to them using the same methods and message isn't likely to convince.

The "closure" relates to the actions the party took in government: the bailout of the financial system was decisive, but was resented by many because bankers were seen as being rewarded for failure, and though the expenses scandal was not confined to our party, it was viewed as happening under the watch of our party. Those who didn't turn out for us included skilled workers who might otherwise support Labour, but could not understand why their living standards were being eroded at a time when it appeared MPs were on the make and bankers on the take - at their expense. Media misrepresentations of migration and welfare payments helped disguise what would otherwise have been anger at a lack of sufficient employment protections.

Policies suggested by candidates in the leadership campaign include support for a living wage, the establishment of a high pay commission to examine executive remuneration, reform of company law to ensure worker representation on remuneration committees, a graduate tax to fund university education - these are all issues which have a wider appeal than the Labour Party as they relate to specific problems facing working people.

Will these ideas be enough to re-open the ears of ex-Labour voters? Not without a coherent narrative - one that is able to convince people that the party is on their side. And not without a renewed effort towards locally-focused campaigning and policymaking. The revival in Labour's membership and poll ratings is perhaps a reflection of the demand for a campaigning party which offers hope rather than the politics of despair served up by the Tory/Lib-Dem coalition. Returning to the subject of those "closed" to Labour and how to get them close to Labour again, there must be a concerted effort at organising in those places in which Labour's presence has been wiped out. This means the southern regions.

Getting back to the spatial metaphors, whatever Labour does from now on will be given an unsympathetic treatment in the ruling class media - unless it is seen as "responsible", or to be more blunt, absolutely opposed to the interests of the class it seeks to represent. But unlike the last period of Labour opposition, there is not a strong Tory government in power - rather there is a stable coalition between the Tories, who failed to win a plurality of seats in parliament, and the Liberal Democrats, who lost seats in the 2010 election. And the coalition cannot depend upon oil revenues or a boom in financial services, as Thatcher did, to provide stability for groups within society that are crucial to holding office - what's more the current global economic crisis is felt more acutely because of the globalisation of capital and communications.

An advantage over past periods of opposition, in organisational terms, is the ability for unfiltered forms of mediation between party members, politicians, and electors - direct communications through email and online social networking.

The Labour Party suffered significant electoral setbacks following the crises of the '30s and '70s - largely stemming from the decisions made by the party's leadership during incumbency in responding to economic crises - however, unlike the drastic retrenchment of the past, the Brown administration focused on sustaining employment and enterprise, rather than rushed spending cuts. Having led the way internationally in dealing with the banking crisis through public ownership as a route to recapitalisation, it is likely that Brown would have argued at the G20 summit in Canada against retrenchment alongside the US President, strengthening the case for a Green New Deal.